BHP's Vicuna copper joint venture has the potential to become a major growth engine, but the real test will be navigating permits and tricky ore processing, according to analysts at Jefferies.
In a Monday note on the project's preliminary economic assessment, Jefferies estimated that Vicuna could eventually contribute roughly 150,000 tonnes of attributable copper per year. That would be a significant addition for the mining giant, especially as its existing Chilean operations face declining output.
What is Vicuna?
Vicuna is a copper project spanning the border between Chile and Argentina, developed by BHP in partnership with other miners. The venture is seen as a long-term bet on copper, a metal critical for electric vehicles, power grids, and renewable energy infrastructure. Jefferies described it as a potential 70-year "core" asset for BHP, meaning it could underpin the company's copper production for decades.
The project's scale is what makes it stand out. Adding 150,000 tonnes a year would represent a meaningful chunk of BHP's overall copper output, which was around 1.7 million tonnes in the last fiscal year. But the path to that production is not straightforward.
Permits: the real bottleneck
Jefferies flagged that the ore body itself is not the main constraint. Instead, the pace of growth will likely be determined by how quickly BHP can secure the necessary permits. Cross-border approvals are particularly tricky, since the project straddles two countries with different regulatory regimes. Environmental permits, water rights, and community consultations can all cause delays, as seen in other large mining projects in the region.
"Permits, not the ore body, will likely decide how fast that growth arrives," the note said, according to the brief. This is a common theme in mining: even the richest deposits can sit idle for years if approvals drag on.
The arsenic challenge
Another key risk is the quality of the concentrate. Jefferies now expects that high-arsenic concentrate will make up 70% to 100% of stage-three production after ramp-up, up from its previous estimate. Arsenic is a toxic element that complicates smelting and can incur extra costs or penalties from smelters.
The solution is roasting, a process that heats the concentrate to remove arsenic before smelting. While technically proven, roasting adds capital and operating costs, and it can create environmental concerns of its own. For BHP, this means the project's economics could be less favourable than initially hoped, even if the copper grade is good.
Why copper matters now
Copper prices have been firm recently, helped by strong demand from China, the world's biggest consumer. In fact, China's copper demand has lifted import premiums to a two-year high, and copper prices have climbed as Chinese buyers return to the physical market. That backdrop makes new supply projects like Vicuna more attractive, but also highlights the urgency of bringing them online.
For BHP, Vicuna is part of a broader strategy to pivot toward future-facing commodities. The company has been expanding its copper portfolio while trimming coal assets. But investors should remember that large mining projects often face delays and cost overruns. The 70-year timeline is a reminder that this is a very long-term play.
What it means for investors
For everyday investors, the key takeaway is that BHP's copper growth story is promising but not guaranteed. The 150,000-tonne figure is an estimate, not a certainty. Permits could slip, arsenic processing could prove more expensive, and copper prices could fall if the global economy slows.
That said, if Vicuna delivers, it could help offset the natural decline at BHP's older Chilean mines, such as Escondida and Pampa Norte. That would support BHP's ability to maintain or grow its dividend, which is a major reason many investors hold the stock.
Investors should also watch how BHP manages the cross-border regulatory process. Any news on permit approvals or construction milestones could move the stock. In the meantime, the project remains a long-term bet on copper's role in the energy transition.
For context, other miners are also chasing copper opportunities. Koryx Copper has boosted its Zambia stake to 80% ahead of drilling, and Zambia's KCM has tapped China for a $498 million copper plant. These moves underscore the industry-wide scramble for new supply.
Ultimately, Jefferies' note is a reality check. The ore is there, but the path to production is littered with hurdles. For BHP shareholders, patience will be key.
